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If your hard drive develops a defect or you want to switch to a new PC, it's the fastest way to restore your familiar environment. Important: make sure to always make a backup on a separate hard drive, a USB stick or a network drive.
A Windows system image, as the name suggests, stores the entire system which means your files plus the Windows system files. Windows backup saves the data that you saved in wizard or whose paths you specified.
Ideally, you'd create a system image for it. Left-click on the "Start" button and select "Settings" > "Update and backup" > "Backup". Now under "Backup", select "Search for an older backup" and click on "Switch to backup and restore (Windows 7)". In the right column, you'll see the item "Create system image". Click on it and follow the wizard instructions.
Switching to Windows Vista is strongly discouraged. The support and related security updates were discontinued in January 2017. The method would be the same if you switch to the "Windows 10" current operating system. In Windows XP, you can find the tool to back up your files in the Start menu under "All Programs" > "Accessories" > "System Tools" > "Backup". After clicking once, the backup and restore wizard will guide you through the backup process.